Greek debt crisis worsens as EU revises figures

Greek debt crisis worsens as EU revises figures

Athens: Markets hammered Greece on Thursday after the EU revised the debt-ridden country’s deficit and debt figures upward, sending Greece’s borrowing costs to unsustainably high levels and pushing Athens closer to an expensive rescue.

Further bad news emerged as ratings agency Moody’s Investor Services downgraded its rating on Greece’s debt by one notch to A3 from A2, and warned that further downgrades were a distinct possibility.

“This decision is based on Moody’s view that there is a significant risk that debt may only stabilize at a higher and more costly level than previously estimated," the agency said.

Moody’s downgrade was likely to make it even more difficult for the cash-strapped Greek government to tap the bond markets for money. The government has insisted that it prefers to access money via the markets to meet its borrowing requirements instead of resorting to a joint euro zone-International Monetary Fund rescue package.

But with investors demanding such punishing rates, the possibility of getting by without the bailout seems increasingly remote.

“Greece is in the midst of another hellish week and now faces no choice but to seek to formally activate the European rescue package," said Ben May, European economist at Capital Economics. “While this may help to ease the markets’ frazzled nerves, the latest upward revision to the 2009 budget deficit highlights the mammoth task ahead."

The European Union’s, or EU’s, statistics agency Eurostat said the country’s budget deficit in 2009 stood at 13.6% of gross domestic product, or GDP, rather than the previously predicted 12.9%, and could be further revised by up to 0.5 percentage points.

The level is more than four times the EU limit set for the 16 countries that use the euro currency, which has been badly hit by the Greek financial crisis. Eurostat also revised the ratio of government debt to gross domestic product to 115.1%, up from 113.4% and the second highest in the EU after Italy.

Pan Pylas in London contributed to this story.